Kentucky Sales Representative Statutes

Independent manufacturers’ sales representatives are typically hired by manufacturers, distributors, and importers to solicit orders for their products from potential customers in designated territories in exchange for a sales commission. Such sales representatives often spend many months or years building up a customer base in their assigned territory and incur substantial up-front sales and marketing expenses that can include travel, lodging, entertainment, and trade show expenses with the hope of generating a stream of future commission income. The sales representative is vulnerable if the principal suddenly terminates their relationship and/or fails to pay all commissions owed to the sales rep.

In response to these concerns, starting in the 1980s and 1990s, many states enacted statutes to protect the interests of these independent manufacturers’ sales representatives. These statutes often:

• Require the sales representative agreement to be in writing;

• Require the principal to provide a copy of the written contract to the sales rep;

• Require the principal to pay the sales rep for all commissions owed promptly following termination (or incur liability for statutory penalties, attorney’s fees, and court costs);

• Strictly limit the circumstances under which the principal can terminate, or fail to renew, a sales representative agreement (e.g., requiring the manufacturer to have “good cause” for termination); and/or

• Prohibit the principal from imposing terms (such as choice of law or exclusive venue provisions) in the sales rep agreement that would effectively require the sales rep to waive its statutory protections under the law.

Thirty-five of the fifty states have enacted some form of sales rep protection legislation.

This article sets forth the text of Kentucky’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023. This article also summarizes a 1995 Western District of Kentucky case that declared portions of the statute unconstitutional.

The Kentucky Sales Representatives’ Contracts Act

Kentucky Statutes, K.R.S. 371.370

As used in KRS 371.375 to 371.385, unless the context otherwise requires:

(1) “Commissions” means compensation accruing to a sales representative for payment by a principal, the rate of which is expressed as a percentage of the amount of orders or sales or as a specified amount per order or per sale.

(2) “Person” means an individual, corporation, partnership, association, estate, or trust.

(3) “Principal” means a person who does not have a permanent or fixed place of business in this state and who:

(a) Manufactures, produces, imports, or distributes a tangible product for wholesale;

(b) Contracts with a sales representative to solicit orders for the product; and

(c) Compensates the sales representative, in whole or in part, by commission.

(4) “Sales representative” means a person who:

(a) Contracts with a principal to solicit wholesale orders;

(b) Is compensated, in whole or in part, by commission;

(c) Does not place orders or purchase for his own account or for resale; and

(d) Does not sell or take orders for the sale of products to the ultimate consumer.

Kentucky Statutes, K.R.S. 371.375

(1) When a contract between a sales representative and a principal is terminated for any reason, the principal shall pay the sales representative all commissions accrued under the contract to the sales representative within thirty (30) days after the effective date of such termination.

(2) A principal who fails to comply with the provisions of subsection (1) of this section shall be liable to the sales representative in a civil action for:

(a) All amounts due the sales representative, plus exemplary damages in an amount not to exceed two (2) times the amount of commissions due the sales representative; and

(b) Attorney’s fees actually and reasonably incurred by the sales representative in the action and court costs.

(3) Where the court determines that an action brought by a sales representative against a principal under KRS 371.370 to 371.385 is frivolous, the sales representative shall be liable to the principal for attorney’s fees actually and reasonably incurred by the principal in defending the action and court costs.

(4) Nothing in KRS 371.370 to 371.385 shall invalidate or restrict any additional right or remedy available to a sales representative or preclude a sales representative from seeking to recover in an action on any other claim against a principal.

Kentucky Statutes, K.R.S. 371.380

A principal who is not a resident of this state that contracts with a sales representative to solicit orders in this state is declared to be doing business in this state for purposes of the exercise of personal jurisdiction over nonresidents under KRS Chapter 454.

Kentucky Statutes, K.R.S. 371.385

A provision in any contract between a sales representative and a principal purporting to waive any provision of KRS 371.370 to 371.385, whether by expressed waiver or by a contract subject to the laws of another state, shall be void.

Conclusion

Although Kentucky adopted the Kentucky Sales Representatives’ Contracts Act, set forth above, in Cecil v. Duck Head Apparel Co. Inc., 895 F.Supp. 155 (W.D. Ky., 1995) the federal district court held that, “the Kentucky law has a direct impact on the flow of interstate commerce. That direct impact unconstitutionally burdens interstate commerce, and therefore, the Statute is invalid.” Cecil, 895 F. Supp. at 158. The court specifically singled out sections 371.375(2) and 371.370(3) of the statute. This statute has not been repealed by the Kentucky state legislature as of the date of this article. In light of the Cecil decision, it appears the Kentucky Sales Representatives’ Contracts Act is invalid absent an amendment from the legislature.

Regardless of the status of the Kentucky statute, a majority of the other states have enacted such statutes, and compliance with these laws is often complex. Manufacturers, distributors, and importers typically bear the burden of compliance with these statutes and should ensure that their contracts and activities are consistent with applicable law. Sales representatives may wish to review applicable laws to understand their rights. If the laws of multiple states are involved, compliance with the relevant law may become complicated and legal advice from a Kentucky sales rep attorney may be appropriate.

If you are interested in the sales representative statutes of other states, click here to view our sales representative statute survey page.

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About the Author

Craig W. Trepanier is a sales representative attorney who handles disputes under the Minnesota Termination of Sales Representatives Act and the laws of other jurisdictions. He can be reached at craig@trepanierlaw.com or at 612.455.0502. Trepanier MacGillis Battina P.A. is a Minnesota sales representative law firm located in Minneapolis. If you need advice regarding your sales representative agreement, or are having a dispute regarding the termination, non-renewal, or modification of a sales rep agreement or unpaid commissions, please contact us. Mr. Trepanier can represent you in the State of Minnesota. If appropriate, we can co-counsel with an attorney in your jurisdiction to leverage our specialized knowledge of sales rep law.